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CIO Best Practices

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Wiley & SAS BuSineSS SerieSThe Wiley & SAS Business Series presents books that help senior-level managers with their critical management decisions.

Titles in the Wiley and SAS Business Series include:

Activity-Based Management for Financial Institutions: Driving Bottom-Line Results by Brent J. Bahnub

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Business Intelligence Competency Centers: A Team Approach to Maximizing Competitive Advantage by Gloria J. Miller, Dagmar Brautigam, and Stefanie V. Gerlach

Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy by Olivia Parr Rud

Case Studies in Performance Management: A Guide from the Experts by Tony C. Adkins

CIO Best Practices: Enabling Strategic Value with Information Technology by Joe Stenzel

Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors by Clark Abrahams and Mingyuan Zhang

Credit Risk Scorecards: Developing and Implementing Intelligent Credit Scoring by Naeem Siddiqi

Customer Data Integration: Reaching a Single Version of the Truth by Jill Dyche and Evan Levy

Demand-Driven Forecasting: A Structured Approach to Forecasting by Charles Chase

Enterprise Risk Management: A Methodology for Achieving Strategic Objectives by Gregory Monahan

Fair Lending Compliance: Intelligence and Implications for Credit Risk Management by Clark R. Abrahams and Mingyuan Zhang

Information Revolution: Using the Information Evolution Model to Grow Your Business by Jim Davis, Gloria J. Miller, and Allan Russell

Marketing Automation: Practical Steps to More Effective Direct Marketing by Jeff LeSueur

Mastering Organizational Knowledge Flow: How to Make Knowledge Sharing Work by Frank Leistner

Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) by Gary Cokins

Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics by Gary Cokins

The Business Forecasting Deal: Exposing Bad Practices and Providing Practical Solutions by Michael Gilliland

The Data Asset: How Smart Companies Govern Their Data for Business Success by Tony Fisher

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Visual Six Sigma: Making Data Analysis Lean by Ian Cox, Marie A. Gaudard, Philip J. Ramsey, Mia L. Stephens, and Leo Wright

For more information on any of the above titles, please visit www.wiley.com.

CIO Best Practices

Second Edition

Enabling Strategic Value with Information Technology

Joe Stenzel

John Wiley & Sons, Inc.

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Copyright © 2011 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.

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Library of Congress Cataloging-in-Publication Data:

CIO best practices : enabling strategic value with information technology / [edited by] Joe Stenzel. – 2nd ed. p. cm. – (Wiley & SAS business series) Includes bibliographical references and index. ISBN 978-0-470-63540-7 (cloth); ISBN 978-0-470-91253-9 (ebk); ISBN 978-0-470-91254-6 (ebk); ISBN 978-0-470-91255-3 (ebk) 1. Chief information officers. 2. Information technology–Management. 3. Information resources management. 4. Management. I. Stenzel, Joe. HD30.2.C55 2011 658.4'038–dc22 2010019067

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

Contents

Preface    ix

About the Contributing Authors    xix

Chapter 1  Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation .......1

The CIO Leadership Paradox 1

The Fences 5

Rules and Innovative Augmentation 13

The CIO and Enterprise Culture 16

Radical Transparency 20

Proactive Risk Practices 23

The CIO and the Customer 26

The IT Organization 34

Notes 39

Chapter 2  Why Does IT Behave the Way It Does?.............41

Making Sense of IT Business Management 41

Putting the Pieces Together 63

Changing the Way IT Behaves 86

Notes 97

Chapter 3  Cloud Computing and the New  Economics of Business .....................................99

A Combination of Technologies Create Cloud Computing 100

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vi  ▸  C O N T E N T S

Some Working Definitions of Cloud Computing 101

Cloud Computing Has Three Component Layers 102

Implications of the Transition to Cloud Computing 104

A Business Strategy Based on Agility 108

Using the Cloud for Business Advantage 111

Business Applications with the Greatest Potential 112

Cloud Risk Considerations 115

Cloud Cost Considerations 118

Case Study: Selling “Designer Chocolates” 120

Desirable Characteristics of New IT Architecture 123

Public Clouds, Private Clouds, and Hybrid Clouds 124

Issues to Consider When Thinking about Private Clouds 128

The Cloud is a Platform for Managing Business Processes 131

Automate Routine Processes, Focus People on Handling Exceptions 134

Four Technologies Enable Responsive Business Processes 136

Notes 139

Chapter 4  Leading with Green: Expanding the CIO’s  Role in Eco-Efficient Information  Technology Adoption ......................................141

What Is Green IT? 144

Who Cares about Green IT? 146

Green IT: A Quickly Maturing Management Discipline 147

Common Challenges Presented by Green 159

Role of Public Policy 165

Role of the CIO 167

Risks and Common Mistakes to Avoid 171

Summary 173

Notes 174

C O N T E N T S ◂  vii

Chapter 5  Sustainability, Technology, and Economic Pragmatism: A View into the Future ..............177

Sustainability 177

Globalization, Decentralization, and Sustainability 179

Future Opportunities for Improving Global IT Sustainability 187

Mobility 203

Ubiquity: Pervasive Computing, Ubiquitous Sensors, and Ad Hoc Communications 212

Energy: Smart Buildings, Renewables, and Campus Sustainability 215

Physical Security and Information Assurance 217

Integrating Sustainability into Strategic Planning 220

The Future Lies before Us 232

Notes 233

Chapter 6  How to Measure and Manage Customer  Value and Customer Profitability ....................237

The Rising Need to Focus on Customers 238

A Foundation for Customer Portfolio Management 245

Distinguishing High from Low Economic Customer Value 255

Measuring Customer Lifetime Value 262

Balancing Shareholder Value with Customer Value 269

The CFO and CIO Must Shift Emphasis 275

Appendix 6A: Activity-Based Costing is a Cost Reassignment Network 280

Notes 282

Chapter 7  Evolution of Networks into Networking ........285

Evolution of Networks into Networking: Computational, Data, Business, and Personal 285

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viii  ▸  C O N T E N T S

Advances in Computational and Data Networks 289

Advances in Storage and Data Networks 291

Business Impacts of Business Networking 295

Business Impacts of Social Networking 299

Virtual Worlds: Second Life 302

Democratization and Socialization of Information 306

The Wisdom of Crowds? 309

The New Reality 311

Adapting to the New Reality 315

Role of IS/IT in Adapting to the New Reality 317

Notes 320

About the Editor  327

Index  329

ix

Preface

Anyone working in information technology today feels the opportuni-

ties for creating and enabling lasting value, and the CIO helps define

those opportunities and turn them into realities. That’s what this book

is about. Humanity has discovered an evolutionary tool that allows us

to realize our true potential—intellectually, artistically, socially, and

above all, creatively. But we must be circumspect as we explore the

uses of this new tool that works as an extension of our own minds.

Living as we do, on the very edge of an evolutionary horizon that

once seemed far away, we must learn to respect the two native forces

that have pulled human creativity in opposite directions since the

beginning: (1) the drive to understand more about ourselves and our

world, and (2) the desire for safety and security. Some part of us craves

the entirely new; another part longs to be safe and is uncomfortable

with change.

No senior executive feels the disjointed pull of these two forces

more than the Chief Information Officer,1 who seeks to create new

frontiers of strategic information technology value for the enterprise,

while working in an environment of service and stewardship for other

people’s interests. New strategic frontiers demand that the CIO take

bold, decisive risks as new technologies offer competitive opportuni-

ties. Service and stewardship responsibilities demand that the CIO also

take care of the day-to-day needs of people that depend on more basic

information technology resources to perform what the enterprise

requires of them.

Other forces distinguish the world of the CIO from executive team

peers. More than any other member of the enterprise, the information

technology professional works with products and services built accord-

ing to designs that represent the most current understanding of the

ways our world is organized. While people from other functional areas

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x  ▸  P R E F A C E

of the enterprise work within organizational structures marginally

evolved from the beginning of the industrial age, IT organizations

embody the principles that underlie information technology products

and services—self-referencing, chaotic, morphogenic systems. The

CIO must work to reconcile IT’s more mature, inclusive perspective

on the enterprise with the traditional views of peers that prefer the

illusory safety and security of departmental silos that use command

and control management policies.

Then there’s the matter of the emerging role of the CIO, with its

many facets in terms of the myriad expectations of the many people

throughout the enterprise, which often boils down to a simple three-

word question of focus. Business or technology? This book acknowl-

edges and addresses these factors by incorporating a few basic premises

in each chapter.

Premise 1: The business of the IT organization is technology, and

the business of the CIO is the business of the enterprise. As such, the

best practice CIO works and makes decisions in a realm of strategy,

customer value creation, cost and performance management, and

outsourcing partnerships while building and maintaining an IT orga-

nization that can develop and manage enterprise technology that

enables strategy.

Premise 2: As a new executive role with an evolving set of respon-

sibilities and expectations, CIOs cannot prepare themselves to learn

what they need to know about the business of the enterprise without

the help of non-IT experts. In addition to the chapters written by

experienced, practicing CIOs acknowledged for their excellence, this

book includes chapters written by performance management, account-

ing, and customer relationship management experts familiar with

leveraging IT value.

Premise 3: The CIO is an investor of enterprise resources account-

able for realizing a return on those investments. This premise acknowl-

edges that the rest of the executive team depends on the CIO’s

specialized understanding and insights of information technology

value opportunities. All the chapters discuss how the CIO can realize

a return on IT investments—including the investment of IT’s many

intangible resources.

Premise 4: All enterprises are unique, and their IT organizations

must align to the specific needs of the enterprise. Each chapter includes

P R E F A C E ◂  xi

considerations for small, medium, and large enterprises across all

sectors. Inherent in this premise is the understanding that all enter-

prises have one thing in common: Success depends on the articulation

and implementation of a clear business vision and strategy. As such,

the IT organization must be aligned with the enterprise vision and

strategy so that it can align its products and services to realize strategic

objectives. Each chapter discusses ways that the best practice CIO works

to align IT products and services to fit enterprise vision and strategy.

Premise 5: All CIOs live and work in a competitive world, and

customer relationship management excellence has become one of the

most important competitive advantages in all sectors. The chapters in

this book consistently address the importance of the IT organization’s

internal and external customers, and the book includes an entire

chapter on customer relationship management best practices.

Premise 6: There can be no comprehensive treatment of the CIO’s

role as leader of the IT organization at this point in the development

of this executive office. At the same time, building on Premise 4, there

are common elements to CIO best practices that apply to enabling

strategic value from IT in any enterprise:

Aligning information technology with evolving business needs,

and devising IT strategies that mesh with enterprise strategy

Designing and maintaining an enterprise architecture that

reflects and enables enterprise strategy

Organizing, motivating, and managing the IT organization to

focus on agile strategy execution and deliver consistently out-

standing performance

Strategic cost management practices for IT Finance that trans-

parently reveal the operational costs of IT services to the CIO

and IT customers

Strategic performance management practices that align the

work of the IT organization with enterprise strategy

Customer relationship management practices that reflect enter-

prise strategy as the build value for internal and external IT

customers

Carefully selected outsourcing relationships managed according

to enterprise strategy

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xii  ▸  P R E F A C E

Calculating and managing for continuous improvement for

the return on investments of tangible and intangible IT

resources

CHAPTER 1 EXECUTIVE SUMMARY

Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

More often than not, the best practice CIO addresses day-to-day

responsibilities with improvisational and extemporaneous solutions.

Entrepreneurial innovation and creativity depend on these nontradi-

tional, spontaneous executive capacities, but these leadership freedoms

must be grounded in the general standards of professional discipline

informed by each unique enterprise strategy. Product and service

innovation have become increasingly dependent on the ways that

information technology gives enterprise decision-makers new ways to

develop an ongoing, interactive dialogue with customers through

enterprise customer-facing employees. Chapter 1 addresses CIO leader-

ship responsibilities and opportunities that promote ways the IT orga-

nization can creatively enable this dialogue between customers and

enterprise decision makers while safeguarding brand integrity, assuring

information security, and creating competitive advantage.

This chapter explores the CIO’s challenges to promote and lead

innovation for the enterprise from within the IT organization in a

highly improvisational style—an unrehearsed interview format—with

subsequent, relevant, fact-checked examples added to support the

extemporaneous insights. In the end, Chapter 1 demonstrates the

ways that best practice CIOs work from a grounded set of personal

guidelines for self-discipline and inspiration.

CHAPTER 2 EXECUTIVE SUMMARY

Why Does IT Behave the Way it Does? by Bill Flemming

Chapter 2 explores IT performance management practices that align

the IT organization and its resources with enterprise strategy. This

P R E F A C E ◂  xiii

chapter blends the essential elements of core business management

best practices with the cutting-edge technology acumen, and discusses

how the best practice CIO integrates these two skill sets. In its current

form, performance management is a control mechanism that exerts its

influence by aligning employees at all levels of the enterprise through

a balanced set of financial and nonfinancial objectives with timely data

that tracks progress and promotes better decision making to achieve

those objectives. Performance management addresses group behav-

iors, and this chapter focuses on the ways that informed performance

management practices optimize behaviors in the IT organization.

The IT organization is a business within a business for enterprises

of any size or industry. Best practice CIOs recognize the ways that the

enterprise IT business differs from other functional areas and depart-

ments, and they design their performance management systems

accordingly. Similarly, within any IT organization, the CIO is respon-

sible for optimizing the performance of a few basic essentials: capacity,

service, IT finances, and alignment of IT business resources with enter-

prise strategy. This discussion examines current IT performance man-

agement challenges in the context of historical precedent by articulating

the ways that the evolution from mainframe to distributed systems

redefines CIO responsibilities for the ways that the IT organization

behaves.

CHAPTER 3 EXECUTIVE SUMMARY

Cloud Computing and the New Economics of Business by Michael Hugos

Cloud computing represents one of the Internet’s most revolutionary

technologies, with transformative, disruptive influences on the ways

that CIOs and their C-suite peers understand enterprise information

technology. While best practices are nascent, CIOs who expect to keep

their jobs can’t stand back and wait for the competition to discover

and master the competitive opportunities of cloud computing. Chapter

3 is a thorough, deliberate examination of all elements of cloud

computing that any CIO must understand to inform and guide the

enterprise executive team.

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xiv  ▸  P R E F A C E

Using a balanced assessment of opportunity and risk, this chapter

discusses cloud computing technology, transition considerations, per-

formance and security concerns, and a matrix of cloud computing

configurations from which enterprises can choose to optimize their

strategic objectives by means of this enabling information technology.

While presenting all the technology options, this discussion considers

each element of cloud computing practice options in terms of how

each makes good business sense in the context of specific IT settings

across enterprises of different sizes and industries.

CHAPTER 4 EXECUTIVE SUMMARY

Leading with Green: Expanding the CIO’s Role in Eco-Efficient Information Technology Adoption by Randy Betancourt and Alyssa Farrell

Sitting at the center of this book is a discussion of one of the most

hotly debated, but potentially significant influence on global IT best

practices: enterprise energy utilization and sustainability practices,

otherwise known as Green IT. This chapter draws on a 12-member

panel of expert contributors that provide the widest possible perspec-

tive on IT-related sustainability management, and as in the previous

chapters, the presentation focuses on the business case for Green IT.

There are as many different perspectives on Green IT best practices

as there are regulatory environments, but the best practices are out

there, and this chapter collects them into one basket.

With a focus on the business proposition, the discussion begins

with examples of Green IT practices as a rapidly maturing and increas-

ingly accepted management discipline. This chapter extends the pre-

sentation of IT performance management best practices from Chapter

2 to include essential Green IT metrics. The author and contributing

experts also explore emerging Green IT innovations, opportunities and

risks, the important role of public policy, and the ways that the best

practice CIO and the CIO professional community must proactively

engage and shape this emerging IT management discipline, with tre-

mendous regulatory implications, for the enterprise bottom line.

P R E F A C E ◂  xv

CHAPTER 5 EXECUTIVE SUMMARY

Sustainability, Technology, and Economic Pragmatism: A View into the Future by Jonathan Hujsak

Building on the business case for Green IT presented in Chapter 4,

Chapter 5 extends that foundation into a comprehensive discussion

of enterprise IT with greater emphasis on the technology and best

practice technology management. The CIO and CFO share many simi-

larities in their responsibility profiles as service providers to virtually

all enterprise stakeholders. This chapter addresses Green IT in terms

of the many hard, measurable facts about the intersection of IT

resources with energy and environmental concerns that CIOs must be

able to readily access and understand, to develop and articulate the

best Green IT practice strategies for their enterprises. Peer executives

(especially CFOs), utility providers, vendors, employees, shareholder

activists, and other major enterprise stakeholders already have access

to these facts, and they increasingly use this information to challenge

the executive team strategy.

With a focus on broad, well-developed sustainability best practices

deployed by Fortune 500 enterprises around the world, this chapter

explores essential definitions, terminology, technologies, employment

and telecommunication trends, and security issues that CIOs can use

to inform peer decision makers at any stage during the development

of enterprise sustainability management practices. Integrating this

detailed information, Chapter 5 presents a performance management

and strategic mapping model customized for managing the sustainable

enterprise.

CHAPTER 6 EXECUTIVE SUMMARY

How to Measure and Manage Customer Value and Customer Profitability by Gary Cokins

In the first edition of CIO Best Practices, CRM was a new competitive

advantage. CRM practices have continued to evolve and be refined

by the expert use of new information technologies. Three years

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xvi  ▸  P R E F A C E

later, CRM has become a core management practice for the C-suite.

In the latest wave of social networking and ubiquitous connectivity,

customers are handing CIOs information about their preferences and

other sometimes-unsavory behaviors, on a silver platter. All customer

behaviors add insight because not all customers are worth the time

and effort it takes to please them.

The CIO’s strategic partnership with the CFO has become increas-

ingly essential for enterprise information technology to capture, orga-

nize, and leverage investments in the customer. This means that the

best practice CIO needs to understand how the CFO and other senior

executives translate a wide range of information about customer pref-

erences for their financial resource allocation decisions.

Chapter 6 breaks down CRM into six sections. Parts 1 and 2 address

current CRM best practices in terms of the relationship between cus-

tomer preferences and shareholder wealth as a foundation for under-

standing customer value and profitability drivers as they relate to

focused, targeted marketing delivery systems. Parts 3 and 4 move from

customer analytics to deliberations about customer value determina-

tions with a focus on customer costs and measuring lifetime customer

value, such that the best practice CIO manages IT and enterprise

resources as investments in the customer. Parts 5 and 6 address an

increasingly outdated and incorrect senior management perception

about the competing interests between shareholder value and cus-

tomer value. The discussion presents metrics for assessing both

customer value and loyalty, and inevitably, the ways that the CIO and

CFO must work to provide comprehensive CRM information for the

enterprise CMO and Sales Director.

CHAPTER 7 EXECUTIVE SUMMARY

Evolution of Networks into Networking by Karl Schubert

Chapter 7 moves full circle to pick up and more deeply explore a

critical new IT development discussed in Chapter 1: The risks

and competitive advantages of social networking. Like cloud comput-

ing, social networking was born of the Internet, and like so many

P R E F A C E ◂  xvii

other facets of information technology, exponential development

seems to be the order of the day in terms of the body of information

the CIO must digest to responsibly guide the management of this new

phenomenon.

This discussion carefully explores the increasingly inextricable

relationships between customers, employees, their use of personal

information technologies, emerging cultural expectations and stan-

dards outside the workplace, and the ways that these factors pose

opportunities and risks for the enterprise. With a focus on the business

case for participation in social networking forums on both the indi-

vidual employee and enterprise levels, Chapter 7 explores the business

impacts of both business and social networking, the virtual world, the

democratization and socialization of information, and ways that the

CIO, IT organization, and enterprise can leverage the new reality of

human connectivity on the Internet.

NOTE

1. This book uses the term “Chief Information Officer” (CIO) to stand for any title the enterprise might use to designate the leader of its information technology organization, such as Chief Technology Officer, and acknowl-edges that a person may serve more than one executive role in some enterprises.

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xix

About the Contributing Authors

Randy Betancourt (Chapter 4) has more than 25 years of experience

with both program development and product management. He cur­

rently works as a client support resource for SAS IT Intelligence

Group, responsible for the technical and business development of its

Green IT initiative. This initiative is a project to refine the instrumen­

tation and data collection techniques used to analyze IT asset

utilization.

Randy’s previous product management experiences include the

expansion of capacity planning and analysis solutions for UNIX envi­

ronments and network infrastructures. He holds a BA in Political

Science and an MA in Public Policy with an emphasis on quantitative

analysis from North Carolina State University. He can be contacted at

randy.betancourt@sas.com.

Gary Cokins (Chapter 6) is an internationally recognized expert,

speaker, and author in advanced cost management and performance

management systems. He is a manager in performance management

solutions with SAS Institute (headquartered in Cary, North Carolina),

the leader in business analytics software and services, and the largest

independent vendor in the business intelligence market (www.sas

.com/businessanalytics/index.html). Gary received a BS in Industrial

Engineering/Operations Research from Cornell University in 1971 and

an MBA from Northwestern University’s Kellogg School of Management

in 1974. Gary began his career as a financial controller and operations

manager for FMC Corporation, and he has been a management con­

sultant with Deloitte, KPMG Peat Marwick, and Electronic Data

Systems (EDS).

Gary was the lead author of the acclaimed An ABC Manager’s

Primer, sponsored by the Institute of Management Accountants (IMA).

Gary’s second book, Activity-Based Cost Management: Making It Work,

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xx  ▸  A B O U T   T H E   C O N T R I B U T I N G   A U T H O R S

was judged by the Harvard Business School Press as “read this book

first.” Gary’s third book, Activity-Based Cost Management: An Executive’s

Guide, has ranked number one in sales volume of 151 similar books

on BarnesandNoble.com. Gary has also written Activity-Based Cost

Management in Government and Performance Management: Finding the

Missing Pieces to Close the Intelligence Gap. Gary’s latest book is Performance

Management: Integrating Strategy, Execution, Methodologies, Risk, and

Analytics. Gary can be reached at gary.cokins@sas.com.

Alyssa Farrell (Chapter 4) supports SAS Sustainability Solutions

and works with SAS customers around the world to understand best

practices and solutions for managing their business with environmen­

tal responsibility in mind (www.sas.com/solutions/sustainability/index

.html). She participates in the Corporate Consultative Group of the

World Resources Institute and the Green Tech Council of the North

Carolina Technology Association, and supports the SAS Executive

Sustainability Council—the leadership team that governs the SAS sus­

tainable business practices (www.sas.com/corporate/corpgovernance/

csr­report.pdf).

Alyssa regularly speaks with trade associations, analysts, and the

press about the opportunities organizations have to effectively manage

a sustainable strategy and drive healthy economic growth. Prior to

joining SAS, she was a senior consultant in the Deloitte Public Sector

practice. In this capacity, she was a project manager for statewide and

countywide systems implementations, and was responsible for user

acceptance testing, change management and training, and middleware

technology selection.

She is a graduate of the Eller College of Management at the

University of Arizona, where she earned an MBA with a concentra­

tion in Management Information Systems. Alyssa also holds a BA from

Duke University, and can be reached at alyssa.farrell@sas.com.

Bill Flemming (Chapter 2) works in a thought leadership

position for the SAS Global IT Intelligence practice. As a thought

leader in IT management, Bill was a pioneer in applying Activity­

Based Management to IT financial management, strategic performance

management to IT maturity, and reconciling system management

maturity, and IT business alignment. Bill has more than 25 years of

experience with both hands­on IT projects and product thought

A B O U T   T H E   C O N T R I B U T I N G   A U T H O R S ◂  xxi

leadership. His current projects include IT Intelligent Scorecarding and

IT financial management. He has published and broadcasted exten­

sively about each subject. As a thought leader in IT business manage­

ment, he embraces the opportunity to effectively manage IT. Bill

currently resides in Florissant, Colorado, at 9,000 feet. In his spare

time, he extensively mountain bikes and climbs “14ers.”

Michael Hugos (Chapter 3), principal at Center for Systems

Innovation [C4SI], mentors teams of business and technical people in

practices of business agility and agile systems development, and deliv­

ers seminars and management briefings. He previously spent six years

as CIO of an $8 billion distribution co­operative, where he developed

the suite of supply chain and e­business systems that transformed the

company’s operations and revenue model. He is a recognized expert

in agility and supply chain management. He won the CIO 100 Award

in 2003 and 2005, the InformationWeek 500 Award in 2005, and in

2006 he was selected for the Computerworld Premier 100 Award for

career achievement.

Michael earned his MBA from Northwestern University’s Kellogg

School of Management, and holds an undergraduate degree in Urban

Planning and Design from University of Cincinnati. He writes a blog

for CIO Magazine titled “Doing Business in Real Time,” and he has

authored several books including Business Agility: Sustainable Prosperity

in a Relentlessly Competitive World, and the popular Essentials of Supply

Chain Management. He can be reached through his Web site at:

www.michaelhugos.com.

Jonathan Hujsak (Chapter 5) is head of operations research and

a senior principal architect at Balance Energy, a new corporate initia­

tive at BAE Systems North America. Mr. Hujsak has over 30 years of

experience in advanced information technology organizations and

initiatives at Fortune 500 companies, high­tech startups, nonprofits,

universities, and research institutes. He has worked with a wide spec­

trum of advanced technologies, including distributed data systems,

federated search engines, artificial intelligence systems, geospatial

information systems, GRID computing, virtualization, cloud comput­

ing, telecommunications, e­commerce, transportation systems, space

systems, logistics, and factory automation in a spectrum of domains

spanning commercial, government, defense, and energy. Mr. Hujsak

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xxii  ▸  A B O U T   T H E   C O N T R I B U T I N G   A U T H O R S

is currently an architect for next­generation sustainable systems,

smart grids, and large­scale demand response and trading systems for

the global energy industry. He holds a BS in Electrical Engineering,

and attended the PhD program in Applied Physics at the University

of California San Diego. Readers who wish to network for further

information on topics covered in this chapter are invited to join

the LinkedIn networking group titled Sustainable Community

Network (www.linkedin.com), or the author can be reached at

jhujsak@gmail.com.

Dr. Karl Schubert (Chapter 7) is Principal of TechNova

Consulting, LLC, providing innovative ideas for technology and man­

agement development. He has served as corporate CTO and vice

president for Xiotech Corporation, vice president and general manager

of Daticon (a Xiotech Company), and chairman of Xiotech India, Ltd.

He has a proven track record of developing leading­edge hardware,

software, and combined product families and delivering them to exist­

ing and new market areas.

Prior to joining Xiotech, Karl served as a technology consultant to

start­up companies associated with Austin Ventures, New Enterprise

Associates, and Sierra Ventures. As CTO, COO, and Senior VP of

Engineering for Zambeel Inc., he was responsible for driving technol­

ogy, engineering, and operations teams to produce the first enterprise­

class, 4D­scalable, NAS subsystem. As VP and CTO of Dell Inc., he

architected Dell’s entry into the storage business, and was responsible

for guiding the storage practice through its first several billion dollars

of revenue. Prior to Dell, Karl spent 14 years with IBM, when he

created the company’s OEM open storage subsystems unit.

Karl has been awarded a number of patents for leading­edge tech­

nological innovation in storage systems architecture, storage area net­

works, and other technology areas. He obtained a PhD in Engineering

from the University of Arkansas, an MS in Chemical Engineering from

the University of Kentucky, and a BS in Chemical Engineering from

the University of Arkansas. His most recent book, The CIO Survival

Guide, was published by John Wiley & Sons, and he is a guest speaker

at professional conferences and a regular panelist in the areas of tech­

nology, innovation, and distributed international development. He

can be reached at karl.schubert@technovaconsulting.com.

CIO Best Practices

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1

C H A P T E R 1Freedom with Fences: Robert Stephens Discusses CIO Leadership and IT Innovation

F ounder and Chief Inspector of Geek Squad and Vice President for

Best Buy, Robert Stephens is an articulate information technol-

ogy leader and innovator who feels most comfortable and direct

when sharing his insights and experiences by speaking rather than

writing. This chapter transcribes a dialogue based on several recorded

sessions with the editor. Section headings were subsequently assigned

by the editor to indicate changes in the themes of the discussion.

THE CIO LEADERSHIP PARADOX

Joe Stenzel: As an innovative IT entrepreneur with experience in both the arts and engineering sciences, you’re schooled to appreciate the vital balance between the creative

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2  ▸  F R E E D O M   W I T H   F E N C E S

dimensions and professional disciplinary standards of CIO leadership expectations and responsibilities. Describe how this apparent paradox plays out in the current information environment.

Robert Stephens: The nature of the game has changed from the per-

spective of the CIO, especially in the last five years. Some of the

rules for IT architecture and design are partially less formal, moving

back in the direction of the mainframe, server client, and dumb

terminal, but rapid prototyping is the area where innovative play-

fulness will soon be codified. With the development of mobile

applications, smaller screens, and fewer buttons, it will be increas-

ingly important for the CIO to avoid becoming too formal. CIOs

will increasingly promote a cultural layer of playfulness within the

enterprise and IT organization—a virtual sandbox if you will—as a

part of the CIO’s arsenal, point of view, and leadership attitude.

Balance is everything. We have freedom to innovate in play, but it

has to be a freedom with fences. There’s always a tendency to

equate playfulness with the ignorant or the rule breakers. What

about HIPAA? What about Sarbanes-Oxley? Critics will tell us that

we can’t playfully innovate while protecting our enterprises.

They’re simply wrong. CIOs get paid to help innovate and stretch.

IT has become even more central to business success than ever,

because the lines between an internal enterprise IT system and a

customer-facing experience are diminishing all the time.

We need a balance between the formal discipline and playful innova-

tion that characterizes the CIO, and the metaphor is really the

human brain. The more we learn about the brain through func-

tional MRI and PET scans, the more we learn that everybody is

creative, everybody is methodical, everybody has varying degrees

and kinds of intelligence by which we express our unique gifts—

cognitive, emotional, social, ecological, artistic. Much of this is

inherited, and the rest is fostered by the environment. The CIO

facilitates creation of an innovative environment within the IT

organization and the greater enterprise by setting the tone as a

disciplined, but innovative, chief executive.

Innovation is art. Balancing is an art. As an inherently playful activity,

art shows us the way to creativity and innovation. CIOs have to

T H E   C I O   L E a D E R S H I p   p a R a D O x ◂  3

get things done, but business pressures place the CIO in a position

of constant paradox: innovate, but keep the enterprise safe and

secure. Business is how we live, and art is why we live. Back

and forth, back and forth.

I’m only now coming up with the words to articulate this human

intellectual dynamic. Art and playfulness are essential in life, and

strategically essential in business. Art is that abstract, shapeless

playground from which new ideas spring, and that’s why it’s so

relevant to business strategy: processes very quickly become com-

moditized, copied, and stolen. As Picasso said, “Bad artists copy.

Good artists steal.” The CIO has to find a way to help enterprise

employees find access to that artistic space where they develop

newer, brighter, faster, cheaper forms of products and services.

That’s why every art historian should take an engineering class

and every engineer should have that art history class—CIOs

included.

This suggests that balanced leadership is characterized by highly personal frameworks for understanding disciplined creativity.

I share the conclusions drawn in Richard Florida’s Rise of the Creative

Class1 and Daniel Pink’s A Whole New Mind2 about the importance

of developing the right-brain, but the message I want CIOs to

understand is that everybody has artistic capacity to some degree,

especially our employees. I learned two important things in my

two short years of art school. Maggie Phillips was a member of

one of the first graduating classes from the Institute in the 1920s,

a classmate of Georgia O’Keeffe, and my 2-D drawing instructor

at the Art Institute of Chicago. She’d walk around us as we were

drawing—like a football coach on the sidelines—and she would

train us by saying:

Don’t look at your hands. Don’t look at what you’re drawing on the paper, look at what you’re drawing—the real object. Your mind will draw and express the object only as well as it has come to know that object. There is no perfect line except the one you draw without editing, without that parental frontal cortex telling you the “rules.” Ignore that voice.

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4  ▸  F R E E D O M   W I T H   F E N C E S

This is really the job of the artist, and it’s a creative, innovative intu-

ition that I continue to remember as I work to balance the impor-

tance of creative freedoms and the inevitable leadership/disciplinary

fences inherent in my work with Best Buy and Geek Squad

employees and our customers. In technology, there are knowable

quantities and things I can control; but in art, where new ideas

arise, there are no rules—no forms codifying creativity. I can see

how some people would struggle with this notion, but the key for

the CIO is to understand how fences and freedoms relate to each

other as a leadership function—the form and the formless. From

my personal perspective as an artist, I can see how so many people

struggle with the question of the relevance of art itself.3 In art and

in technology, there are no movements like the Dadaists or

Surrealists anymore. All executives can be their own Institutes of

Art, and this is certainly true in the world of “Executive-Interpretive

Information Technology.” There are no movements anymore. So

what new insight am I going to meaningfully contribute to the art

world/business world/CIO world?

The balance of freedom with fences includes a very personal element

of self-awareness for every CIO. I now see my innovative and

creative endeavors as an exercise of self-discovery. What is my

style? What kind of employee do I want? What kind of system do

I want to build?

The leadership relationship between art, play, innovation, and busi-

ness world disciplines for the CIO is to unlock the potential of each

individual in the enterprise. Some people simply aren’t cut out for

management, but make good technical leaders. Many CIOs are

not aware of their real gifts in terms of how they can facilitate the

enterprise and the IT organization through teaching. In each case,

and with each person, a good IT leader recognizes these gifts and

places each employee into the roles in which that person can

succeed, according to his or her gifts.

This is the quest that preoccupies me now. One of my favorite quotes

is from Andy Warhol, whose words released me from my guilt

when I dropped out of art school to go back to work at Verlo

Mattress Factory in Chicago, where I could make really good